Redfin is facing a class action suit in California for classifying field agents as independent contractors. The suit — filed in December in Alameda County Superior Court — alleges that Redfin field agents were set up as independent contractors rather than employees so that the online real estate company would not have to pay its share of payroll taxes, overtime wages and other expenses.
“To avoid the payment of these legally proscribed business related expenses to the fullest extent possible, Redfin devised a scheme to place the responsibility for the payment of these costs and expenses of Redfin on the shoulders of the plaintiff and other field agents. As employer, Redfin is legally responsible for the payment of all of these business related expenses,” the suit says.
Seattle-based Redfin, fresh off a $50 million venture round last November, declined to comment on pending litigation. The plaintiff in the case is Ivonneth Cruz, who worked as a field agent for the company from February 2010 to May 2013.
Redfin hires some of its real estate agents directly, paying them as full-time employees. But field agents or associate agents, who tour homes with buyers and host open houses, are independent contractors who are not employees of the company. They are paid a fee for each service that they perform. The vast majority of real estate brokerages employ their agents as independent contractors, so the practice is not uncommon in the industry.
However, the suit notes that Redfin misclassifies the field agents, and notes that they should be treated as full-time employees. Under California law, penalties for the misclassification could be between $5,000 and $15,000 per infraction, and could reach as high as $25,000 if the courts determine there was a pattern to the violations.
One of the key issues is whether Redfin controlled the work environment for the field agents, something that attorneys for the plaintiff argue, noting that Redfin provided direct supervision and did not offer the flexibility typically associated with contracting. The contractors also had no ability for profit or loss since Redfin controlled the appointments they received, with attorneys arguing that field agents were not able to “market and sell their own real estate.” They also did not have the ability to make personnel decisions, the suit says.
Additionally, the suit says that Redfin failed to pay the contractors for hours worked — as well as overtime hours and reimbursement of business expenses. It also failed to provide meal and rest breaks, and reimburse them for a share of payroll taxes and insurance costs.
The lawsuit comes at a inopportune time, since Redfin is bolstering its staff and board in what appears to be a bid to go public.
You can see the full suit here.